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Goldman Sachs (GS), JPMorgan Chase & Co. (JPM): Greenhaven Associates Bulks Up Its Top Financial Holdings

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Edgar Wachenheim‘s Greenhaven Associates has two distinct features: a concentrated portfolio and an emphasis on long-term investing. Thus it is no surprise that no drastic changes are seen in its equity portfolio as disclosed through its latest 13F filing with the SEC. However, the fund’s exposure to the finance sector was increased, with it now representing 25% of its portfolio value. The top finance-related picks which had increases to their positions were Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM). Among other top holdings, Lowe’s Companies, Inc. (NYSE:LOW) and Whirlpool Corporation (NYSE:WHR) represented the consumer discretionary sector, which also comprised 25% of the fund’s portfolio value, and FedEx Corporation (NYSE:FDX), which was one of Wachenheim’s bets in the industrials sector, which formed another 17% of his portfolio’s value.

Lowe's Companies, Inc. (NYSE:LOW)

Greenhaven has about $5.72 billion in assets under management and the market value of its equity portfolio stood at $5.55 billion at the end of March. The top ten holdings constituted more than 88% of the fund’s equity portfolio, while the turnover ratio for the quarter remained relatively low at 24%. Wachenheim purchased the fund in 1998 from the Gottesman family and has successfully passed on his investment prowess to quite a few of his employees, who later set up their own shops; Chieftain Capital and Brave Warrior Capital being two such examples.

Through our research at Insider Monkey we discovered that a portfolio of the 15 most popular small cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by 7 basis point per month during the same period. In forward tests from August 2012 through March 2015 these top 15 small-cap stocks continued to crush the market, by over 80 percentage points (read the details here).

Even after slicing its stake by 4% in Lowe’s Companies, Inc. (NYSE:LOW) to 10.79 million shares valued at $802.50 million, the company was Greenhaven’s largest holding. The $67.3 billion home improvement retailer was upgraded to an ‘Overweight’ rating by Piper Jaffray recently with a price target of $88, which represents an upside of 23%, on account of promising housing turnover trends. However,  Lowe’s Companies, Inc. (NYSE:LOW) has recently pulled the plug on its sale of Chinese flooring. There are concerns that the company’s flooring might contain illegal levels of formaldehyde, the same concerns that sent Lumber Liquidators Holdings Inc (NYSE:LL)’s stock in a tailspin this year. Both companies have the same Chinese supplier for flooring, Tecsun. In an attempt to pacify both customers and investors, Lowe’s Companies, Inc. (NYSE:LOW) said that it would conduct independent testing of its flooring products. Ken Griffin‘s Citadel Investment Group is another major stockholder of the company as it held some 3.75 million shares at the end of the fourth quarter.

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